Thursday, June 28, 2007

The history of the Due Process Clause in the United States' Constitution, and how it came to cover everything from (at various points in U.S. history) freedom of contract to abortion, is a long story which I should tell some day, but here is a very short version. It starts with the idea of a "common law" or "due process" -- synonyms in late medieval and Renaissance English law. Then these phrases meant not substantive judge-made law (as "common law" means today) but a group of procedural rights and principles which courts had slowly developed through precedent and that all royal courts in England (even to some extent privately owned courts) were expected to respect. One of these basic due process principles was that a court could not "take property from A and give it to B" except as a remedy for a wrong done by A to B. The Due Process Clause of the 5th and 14th Amendments -- "no deprivation of life, liberty, or property without due proces of law" -- was meant as a reference to these basic rights and principles, as well as to the continuing precedential development of such rights and principles by courts.

The basic idea behind the Lochner line of cases was that minimum wage laws, maximum hour laws, and such were taking property from one group (e.g. capital) and giving to another (e.g. labor) even though the one group had done the other no adjudicated wrong. But since many government laws even in the 19th century did redistribute rights people value from one class to another like this, this way of applying due process principles was too broad an attack on statutory sovereignty and practical politics to work without some compromises.

But it was too late to discover such compromises throught the slow process deciding disputes and discovering rules, before being swamped by the tide of Progressive statutory sovereignty. The Lochner line of cases quickly became hedged about and mutated: the principle involved was later said to be freedom of contract (both an employer's and a worker's rights were violated by such laws, rather than the problem being a redistribution without a wrong), and it was held (even before the New Deal) that a government merely had to come up with a "rational basis" to justify taking in this loose sense from group A to give to group B, etc.

After Footnote Four, "merely economic" rights like property were derogated -- it became trivial for government to "prove" a "rational basis." So we now find "rational basis" applied to most kinds o f rights while an "important/compelling governmental interest" is applied to important personal and political rights like contraception, abortion, free speech, voting, interstate travel, etc. (BTW, that U.S. courts find interstate travel to be a fundamental right is very interesting in light of the importance of low exit costs in fostering healthy legal and political competition).

The "rational basis" test is the state of Lochner precedent today -- a trivial test that "merely economic" laws practically always pass, in contrast to the "rationality-with-teeth" of personal rights cases like Lawrence v. Texas. Nominally, however, the test of Lawrence is the same as the test of Lochner, and both are good law, so that it takes only a court sympathetic with property rights to revive Lochner.

Such a development may take the form of an elephant that is in the room of modern due process cases -- freedom of contract. Implicit in Griswold, Planned Parenthood v. Casey, and many other such cases is not only a personal right, but a freedom of contract that is quite necessarily associated with this personal right. Without freedom to contract with an abortion provider, the right of a woman to get an abortion would be unduly burdened. Only this can explain why a contraception clinic is able to sue for a right to vend, not merely use, contraception, and Planned Parenthood is able to sue for a right to provide abortion services, not merely for a right of a woman to have an abortion.

The same is true for almost any other fundamental right. Our crucial right of interstate travel, for example, must involve to at least some extent the freedom to contract with an airline company (buy a plane ticket and travel), to purchase a motor vehicle, to contract with a car rental company, and so on. This being the case, our courts should recognize that freedom of contract is not "merely" an "economic right." It is also a basic political right. Our courts should recognize a general freedom of contract, which becomes a fundamental right if it involves a contracting about a fundamental right, whether that be buying condoms (Griswold v. Conneticutt) or sending our children to private schools (Pierce v. Society of Sisters).

Monday, June 11, 2007

There have been over the years several plans and attempts to develop very fined grained markets online. There are several barriers to the success of such markets. An important barrier recently raised by Zooko in his comments on the Tahoe peer-to-peer disk backup project is the vulnerability of and to a centralized mint issuing money.

One possible answer to central mint vulnerability is bit gold -- a currency the value of which does not depend on any particular trusted third party. Another alternative is an object barter economy.

The key ideas of this nanobarter scheme are

(1) the stuff to be traded (in Tahoe, disk space for backup) is represented by digital barter certificates (same protocol as digital cash, but every node is a "mint" that issues its own barter notes), and

(2) default barter order and an agent ("market translator") that translates user behavior into barter orders. In the disk space economy, the default barter order might be to simply do a periodic barter that backs up N gigabytes of other peoples' disks in exchange for N gigabytes of their own. Many more sophisticated barter orders are also possible.

If the reader is familiar with Menger's account of the origin of money from barter, this scheme is quite in the spirit of his scenario -- except that we reduce the transaction costs of barter by brute force automation instead of by making everybody choose a single currency.

The transaction log and accounts are presented to the user in terms of a "pet currency"; the market translator automatically converts all different kinds of barter note prices into their pet currency values whenever prices need to be presented to the user.

Every computer on the network (called a "node") runs a "mint" that issues "currency" (barter notes) backed by its commodity (e.g. disk space). In a simple system all disk space barter notes are treated as equivalent. Or there might be L different currencies corresponding the the L different kinds of leases in Tahoe. (In Tahoe a certain amount of disk space on a foreign disk is "leased" for a certain period of time). Indeed, a barter note is simply a lease in bearer form -- it can mean "I promise to bearer to provide G gigabytes of disk space for D days", or whatever the terms of the lease is.

In a simple system, the barter note may simply be a ticket that never gets traded, merely issued and used. In a slightly more advanced system they trade but only at par value. A gigabyte is a gigabyte regardless of whose server its on -- this is a very simple proxy measure that excludes service quality from automated consideration. Since this is a nanomarket, there is normally no opportunity for the user to intervene with a more sophisticated or subjective judgment. Even a crude proxy measure, if full automated, may be sufficient for a nanomarket to outperform the non-nanomarket status quo (no transactions at all or the use of resource allocation algorithms, although the latter in a broad sense can be considered to be competing nanobarter systems).

In a more sophisticated system (probably overkill for the purposes of Tahoe) some disk space notes trade at a discount because their backup services are unreliable. Bots "ping" the backup services provided by nodes to gather statistics on their reliability, and then buy reliable and sell unreliable notes. There are O((LN)^2) automated currency exchange products which these bots trade. The mental transaction cost problem caused by having O((LN)^2) prices with LN currencies is thus solved underneath the covers by these automated trading bots. The resulting trades are presented to users, if necessary, in terms of pet currencies, and we can have a large barter economy without the mental overhead of all those prices.

To avoid the transaction costs of thinly traded markets, the bots might come to prefer the notes of one or a few services as "intermediate commodities" asMenger described, and most of the markets might become unused, leading to O(LN) actively traded markets -- an economy with a constant number of currencies and LN prices. But that's an entirely optional process that can be allowed to emerge. And with the right reliability-ping and arbitrage bots I suspect the transaction costs of thinly traded markets might be quite small, so that there is no compelling reasoning for a centralized currency to emerge and the added reliability of multiple currencies can be retained without the hassle (mental transaction costs) of users having to deal with multiple currencies.

There are few computational transaction cost barriers left to developing nanotransactions -- the biggest is network delay time. The largest remaining barrier to nanomarkets is, for most kinds of transactions, mental transaction costs. User audits of nanotransactions cannot be both frequent and at fine granularity, or mental transaction costs quickly come to dwarf the value added by the market. Any problems with nanomarkets that might require such audits must be handled in a highly automated fashion.

The approaches to designing this automation all seem to start with developing reasonable proxy measures of service value. For nanomarkets it is far more important that these be measurable in fully automated fashion than that they be terribly accurate. After good proxy measures have been developed, one must obtain or estimate user preferences in terms of these measures. Obtaining preferences directly from the user has to be done in with traditional value granularites, otherwise mental transaction costs dominate. Alternatively, further proxy measures can be made that estimate user economic preferences from their normal input behavior. These are then compiled into automated nanotransactions with the market translator.

Saturday, June 09, 2007

As Jefferson said (in 1820): "To consider the judges as the ultimate arbiters of all constitutional questions [is] a very dangerous doctrine indeed, and one which would place us under the despotism of an oligarchy. Our judges are as honest as other men, and not more so. They have, with others, the same passions for party, for power, and the privilege of their corps. Their maxim is 'boni judicis est ainpliare jurisdictionem,' and their power the more dangerous as they are in once for life."

Jefferson was like almost all Whigs (the philosophy, not the parties) overly enamored of the legislative branch. (Bagehot's sovereignty of Parliament was the end point of this trend). Supreme Court tenure is the closest thing we have to political property rights and the resulting long time horizons in this country. It is also, at the risk of sounding parochial, a group of highly trained and experienced professionals. Would you rather have experienced software engineers writing -- or at least reviewing -- the code that runs on your computer, or bunch of frat boys who happen to speak smoothly and look good on TV?

With the possible exception of the independent agencies, the federal judiciary is the only branch with anything resembling long term political preferences. This is reflected, for example, in the very high quality and care put into their opinions, compared to the typical ideological quackery and other ignorant nonsense that generally passes for political debate in the Congress and the mass media and beyond.

The Court, it is true, has like the executive and legislative branches eventually succumbed to every long-term political trend. But it has severely attenuated many of the political fads most dangerous to liberty.

The current popularity (and abuse) of this Jefferson quote stems from a propaganda movement Jefferson would have abhorred: to invest our executive branch with arbitrary powers to act unchecked by our Constitution. The hot air in this whole debate about "who decides what is constitutional" also reflects the general ignorance about how separation of powers works.

To summarize separation of powers in one sentence: it is a formal system of mutual veto. Under our corporate charter here in the U.S., our Constitution, Congress gets a full veto at will because it must originate legislation. The President gets a partial veto at will. The Supreme Court's veto by contrast can only be of a very specific and careful kind. It only gets to decide what it has to decide when asked to decide a case in the face of conflicting laws. It must decide whether a statute conflicts with our corporate charter, the Constitution. In such cases the charter must prevail. Articles of incorporation trump by-laws. And it must justify such a ruling in a legally professional opinion.

Nothing at all stops the Congress or the President from vetoing legislation because they believe it to be unconstitutional, and indeed this was quite normal in the first century of our Republic to have long debates about the meaning of the Constitution in the halls of Congress. This was long a habit, up to the 20th century, until Progressive legislators decided they didn't much understand or care for that archaic charter. Even Congressional supporters of constitutionalism rhetorically shifted the Reform-and-Jingo media flack they got from arguing that a desired law violates our charter to the relatively immune Court. (This was recently reflected in Senator Spector voting for the Military Commissions Act despite expressing his belief that it was unconstitutional -- the Court will take care of that, he said).

It is profoundly unfortunate that two branches have abdicated their responsibilities to our Charter, but the solution is hardly to strip the responsibility from the only remaining branch that still to some extent exercises it. What is most extremely dangerous to liberty for the executive to do is ignore such a Court opinion and proceed to execute a law that the Court has carefully explained violates our Constitution. This has happened to a disturbingly large degree in the current Bush Administration, for example with its warrantless NSA mass-surveillance pgoram. It most recently and famously occurred at a local level, where the Los Angeles County Sheriff released media celebrity Paris Hilton from jail in violation of her judicial sentence. She had been punished by the judge according to law for her repeated breaking of drunk driving and probation laws. This is one sheriff who should himself face some jailtime if we still live under "the rule of law, rather than of men," as the founders of our country intended.

This kind of arbitrary executive power, but of a ubiquitous nature rather than as a temporary response to national emergency or the quirk of a celebrity-worshipping (or bribed?) sheriff, is what the current criticisms of the Court, if they prevail, will result in. This outcome would destroy one of the few remaining controls against arbitrary power we have left.

Saturday, June 02, 2007

Live from my alma mater, Professor Orin Kerr asks why U.S. Supreme Court Justice Ruth Bader Ginsburg has recently taken the gloves off in her dissenting opinions. They are getting less "collegial" and more blunt.

Ginsburg is following in the grand tradition not only of Justice Harry Blackmun (who, as Kerr points out, sharpened his rhetoric and made fairly direct appeals for political attention just before he retired) but of Justice Antonin Scalia. Scalia's (in)famously ascerbic dissents have long been an object of interest among legal commentators, who have wondered how such rhetoric can do anything but further antagonize his fellow Justices, whom he presumably would rather influence towards his point of view.

The answer is that he had a different audience in mind. His purpose was probably not, as Kerr suggests for Blackmun, to influence elections themselves -- voters don't read Supreme Court opinions. Scalia's dissents instead played a big role in drawing the attention of conservative insiders to the Court. They motivated conservative pundits to pay attention to the Court, and conservative pundits got conservative media generally paying attention. They had the authority of a Justice to back their claims that there were big problems with the Court. Scalia's dissents have provided a blueprint for what legal doctrines conservatives should support, and which need fixing, a blueprint which cannot be obtained either from typical conservative punditry about abortion etc. or from the liberal legal academia. Many talented conservatives became involved in finding and promoting high quality judges with the proper Scaliaist beliefs, like now Chief Justice John Roberts. Highly motivated conservative attention is why talk radio, to the bewilderment of all except conservatives, buried Harriet Myers for insufficient conservative purity. Instead of two more Justice David Souters -- a seemingly conservative Republican pick who infamously ended up turning out quite liberal opinions -- conservatives as a result have two more solid seats "in the mold of Scalia and Thomas" -- really far more in the mold of the former -- on the Court with Roberts and Justice Samuel Alito.

I give Scalia's sharp dissents much of the credit/blame for that. An effective ideologue does not pull punches. Ginsburg and Justice John Paul Stevens would be politically wise to folllow Scalia's strategy of direct talk if they wish to influence future Court choices. They have the best tenure anybody could hope for and they should directly speak their minds. As for its overall effect, bluntness may make the Court seem less civilized -- hurting its authority in the same way that taking off its robes and dressing in jeans would hurt its authority -- but it increases the amount and diversity of truth that it speaks. That is a quite welcome thing in these parts.

"Like most blogs worth my attention, this blog is updated only infrequently. That is because the authors of blogs worth my attention only post when they have something to say that is true, relevant and not already known by their audience. Most of the human race does not have the skill to know when an idea has these three properties. The skill is particularly rare in the fields of politics and economics, which is why this blog is such a rare and valuable thing." -- Richard Hollerith